Where Are All the Black and Female Venture Capitalists?

Last week Forbes released the 2017 Midas List, featuring their picks for the world’s 100 “smartest” venture capitalists. Of these hundred VCs, there are almost as many men named David as there are Women. The list includes zero black men. And zero black women.

Silicon Valley jargon calls this the 2% problem, referring to the narrow slice of African American representation in the largely white and Asian male dominated world of tech startup. On the Midas list, it’s more like a 0% problem.

Or Perhaps the .02% Problem

Nearly three quarters of the Midas List are based in the California Bay Area, most of them in Menlo Park and Palo Alto. There’s so much money flowing through that part of the country, ready to fertilize innovative tech ideas. But it’s difficult for women of color to get any.

Research conducted by digitalundivided, which examined over 60,000 companies, shows that at the top three tech companies there is only one black employee for every 47 white employees. Those top three companies? Twitter, Facebook and Google. And that’s .02%, by the way. Not 2%.

The research found 1,630 white men who are venture capital partners, but only 5 black women (that’s .003%). Out of 10,238 venture deals in the years 2012-2014, only 24 of them were with black women (.002%).

If you need a more practical picture of what that means, consider that even a failed startup is able to raise, on average, $1.33 million in venture capital. But if the startup is run by a black woman? She might get $36,000.

That’s the result of the Silicon Valley Ivy League bro culture. But look out, VCs of privilege. The tables are turning. Women of color are coming to the Bay. In fact, despite their glaring underrepresentation on the Midas list, they’re already there. And they may not be coming through Stanford or Harvard.

Enter Backstage

Pew Research shows that black enrollment in higher education is up in recent years. Arlan Hamilton, however, didn’t bother with that step. She skipped college and went to Palo Alto with nothing, hoping to launch a VC fund focusing on startups run by women, people of color, and LGBTQ entrepreneurs. She ran out of savings pursuing her dream and became homeless.

But she kept trying. And it worked. Hamilton now operates the multimillion dollar Backstage Capital, which she founded in 2015. Through Backstage, Hamilton has helped companies like Tinsel take off.

“Last year when I was raising money, being black, being a woman, being pregnant–it was just strike after strike of what investors are not interested in,” Aniyia Williams, CEO of Tinsel, recently told Inc. “But when I talked to Arlan, she got it right away.”

Venture Capitalists like Hamilton are helping entrepreneurs like Williams solve the diversity problem in Silicon Valley Tech. And some of Silicon Valley’s more “traditional investors” (read: white men) are getting on board. Chris Sacca, chairman of Lowercase Capital and number 2 on the Forbes Midas List, is now a limited partner at Backstage. The vision of Silicon Valley equality is not limited to minorities.

The Forerunners of Change

Kristen Green’s Forerunner Ventures started as an all-women firm. To be more precise, it started as a one-woman firm in 2003, and grew to an all-women firm over the next decade. Last year it expanded to include an analyst who’s an African American male.

Green ranks as one of the 6 women on this year’s Midas list. 7% of partners at top venture capital firms are women. The Midas list falls slightly short of representing this, with only 6% of the list being women.

Forerunner has a strong track record of investing in female lead startups, including Glossier. The increase of female representation in Menlo Park will symbiotically increase black representation as well.

Creating an Ecosystem

Perhaps nobody is focusing on the so called 2% problem more directly than Monique Woodard. She is partner at 500 Startups, making her among the .003% of capital partners who are of color. Last year, after she came on as partner, she launched a campaign to invest $25 million–which qualifies as a “microfund” by Silicon Valley standards. The money will go to 100 or so black and Latino lead early-stage startups.

“I very specifically wanted to work at the early stage when founders need the most help and the most support,” Woodard told USA Today. “That’s where you can make the most impact for black and Latino founders.”

And she is doing more than just investing to share the power. As executive director of Black Founders, Woodard is “creating an ecosystem that stimulates tech entrepreneurship and fosters economic growth” through international programs, events and conferences designed to “increase the number of successful black entrepreneurs in technology.” In other words, she’s not just looking for black entrepreneurs. She’s creating them.